Question

Listed below are some items found in the financial statements of Tony Gruber Co. Indicate in which financial statement(s) the following items would appear. (a) Service revenue. (b) Equipment. (c) Advertising expense. (d) Accounts receivable. (e) Owner’s capital. (f) Salaries and wages payable

Answer 1

Answer:

The correct financial statement for the respective items is:

a) Service Revenue - Income statement.

b) Equipment - Statement of financial position.

c) Advertising expense - Income statement.

d) Accounts receivable - Statement of financial position.

e) Owner’s capital - Statement of financial position.

f) Salaries and wages payable - Statement of financial position.

Explanation:

a) Service Revenue - Service revenue refers to the sales generated from the services provided/offered by the business to its customers. Service revenue is an item of the income statement and appears on the credit side amongst revenues/incomes list.

b) Equipment - Equipment in accounting is used to refer tangible items such as plant, property and motor vehicle which are expected to be used for production for longer than one accounting period. They are tangible items and form part of the statement of financial position under the non-current assets.

c) Advertising expense - Advertising expense refers to operating expense incurred by the business in advertising its products/services. It is an item of the of the income statement and appears on the debit side amongst expenses list.

d) Accounts receivable - The term accounts receivable refers to all the payments a business is expecting for goods or services it provided to its customers on credit. It is a part of the statement of financial position and appears under the current accounts.

e) Owner’s capital - Also known as the owner's equity, owners capital  refers to all the investment the owner has put into the business.This maybe in the form of funds or assets. It is a part of the statement of financial position and appears under the Capital  and retained earnings / losses accounts.

f) Salaries and wages payable - Salaries and wages payable refers to salaries and wages due/owed to the business's employees for prior periods.It is part of the statement of financial position and appears under the current liabilities accounts.